The Dark Side Of Crowdsourcing
I saw a piece about how crowdsourcing can help small businesses, but the author, Laura Rich, never mentioned the motivations of the crowd: why do they help?
Laura Rich, Tapping the Wisdom Of the Crowd
FROM all appearances, Trek Light Gear is a substantial operation. The company sells many products, like its signature lightweight hammock, backpacks, tarps and apparel. It operates a flagship store in Boulder, Colo., distributes products online and sells at festivals and events all over the country.
But Trek Light has a full-time staff of one: Seth Haber, the founder. “I’m always trying to seem bigger,” he said.
For example, when it comes to product development, branding and market research, he has felt the pinch of being a small operation. So last year, he turned to crowdsourcing for help.
Through a local company called Napkin Labs, Mr. Haber gained access to a large pool of consumers for feedback on how the company was presenting itself and where it should be going. The process began with a brainstorming session with the principals of Napkin Labs, Riley Gibson and Warren Ng.
They filled a white board with diagrams and notes, clarified Mr. Haber’s goals for his business and identified his crucial branding question: Should he focus his efforts on the company’s hammock or expand into related areas, like products for campers?
To get an answer, a series of exploratory questions was posted to the Napkin Labs crowd members, asking them about their camping experiences and what frustrations they might have endured. Additionally, they were asked for feedback on the brand itself.
After a few weeks, Napkin Labs tallied up the responses and delivered the crowd’s verdict: expand the business. “It really confirmed my decision not to pigeonhole the business around the lightweight hammock,” Mr. Haber said.
Napkin Labs later delivered a more detailed report and is now deploying its crowd to work with Mr. Haber on new product ideas. Although compensation varies by project, the crowd is paid based on a point system that evaluates the frequency of participation, quality of ideas and influence on the outcome. Mr. Haber’s project was treated as a test case, but Napkin Labs typically charges $10,000 and up for a project that involves both crowdsourcing and consulting.
I thought Napkin Labs sounded interesting, until I started to turn over some rocks. Obviously, there is a need for confidentiality and consideration for the ownership of a company’s ideas. But reading the terms at Napkin Labs quickly led me to realize that something iffy is going on here. Here’s the terms with my comments in brackets, bolded and italicized.
via Napkin Labs Terms And Conditions
1. 1. Parties and Description of the Services
Napkinlabs.com, is a web site that lets users such as yourself (“Innovators”) submit ideas, comments or Ideas (collectively “Ideas”) regarding a problem or project (“Project”) that Napkin Labs, Inc., a Delaware corporation, or its affiliates (which are referred to as “Napkin Labs”, “us”, “we” or “the Company”), has posted on the Website (defined below). Often the Website will allow the Napkin Labs community of Innovators (the “Network”) to interact, question, comment, propose problems, suggestions and/or ideas (such interaction, questions, comments, problems, suggestions and/or ideas is collectively referred to as “Ideas”). The Projects will usually be based on topics that a customer (“Customer”) of the Company has requested us to post for submission of Ideas. The Ideas may be commercialized, produced and sold by Napkin Labs, the Customer, or others.
The NapkinLabs.com web site and its associated services (the “Services”) may be found at the domain and its related subdomains found at www.napkinlabs.com (that website and any successor website or other NapkinLabs website, is referred to as the “Website”).[…]
1. 6. License Granted Company for Unpurchased Ideas; Transfer of Title to Company for Purchased Ideas.
Whenever you post an Idea on the Website, you hereby automatically grant to the Company a royalty-free, worldwide, fully paid-up, transferrable, sublicensable, divisible, perpetual, irrevocable, non-exclusive right and license to use, reproduce, modify, arrange, rearrange, display, transmit, market, sell, offer for sale, manufacture, import, prepare derivative works based on, distribute throughout the world (in any medium now known or hereafter created), publicize, and otherwise utilize or exploit in any fashion with your Idea including any and all Intellectual Property Rights (defined below) pertaining thereto.[So, before anything else, as a crowd contributor, you yield any rights to any ideas you share. So if I were to outline a better way to organize warehouse operations for a client, I have waived any rights to use those ideas elsewhere? Yes, you have, and those ideas are now owned by Napkin Labs, who can assign them to it’s customers, or do whatever it wants with them.]
If the Company only obtains a non-exclusive license from you, you do not owe the Company any money for your own use or exploitation of the Ideas or account for any payments you receive, and similarly the Company does not need to pay over or account to you. This foregoing non-exclusive license is granted even if you do not receive an Innovators Payment Amount. In this Agreement the term “Intellectual Property Rights” means all statutory (whether state, United States Federal, or non-United States Law) and common law intellectual property rights of any kind, related to a work of authorship, recording, idea, discovery, invention, creation formula, algorithm, development or improvement, whether or not reduced to practice and whether or not patentable or protectable under any statute, including, without limitation, any and all trademark, service mark, mask work, copyright, rights of paternity, integrity, disclosure and withdrawal (sometimes referred to as “moral rights”), and patent and industrial rights.
Notwithstanding the foregoing, if you receive an Innovators Payment Amount of over $100 for an Idea, you hereby irrevocably and perpetually assign without further action by you, and agree to deliver such additional assignments or other instruments of transfer as may be reasonably requested by the Company, all of your right, title and interest in and to the Idea (and any related concepts, ideas, improvements and/or modifications thereto) including without limitation, all related Intellectual Property Rights and the right to sue and settle any past, present and future infringement of any such rights. If for any reason such assignment is not fully effective (by law or otherwise) , you hereby grant a license to Company in the Idea under the terms of the above paragraph, except that the license is exclusive. To the extent such Idea or related Intellectual Property Rights cannot be assigned or licensed, by law or otherwise, you hereby waive enforcement of such rights against Company, its successors, assigns and licensees. You further agree that you will not make any claims against the Company or any third party who is assigned or licensed rights in such Idea by the Company, based on any allegations that any activities by the Company or such third party infringe your (or anyone else’s) Intellectual Property Rights in the Idea. You further represent, warrant and covenant that in connection with any such assignment you reserve no (and are unaware of any other party having any) rights whatsoever with respect to such Ideas and related Intellectual Property Rights and the Company will have the right to enforce all Intellectual Property Rights in the Idea against you and all other persons with respect to any subsequent use by you of such Idea. You will not claim that the amount of the Innovators Payment Amount was less than a fair amount or that it was not adequate.[Ouch. So any idea offered up is owned by Napkin Labs for $100.01, and you have no further claims.]
You will assist the Company in perfecting, maintaining, enforcing and defending its rights in Ideas it obtains from you, including without limitation, signing patent applications, patent assignments, copyright registrations, giving testimony and the like. If the Company requests you to do these things and it will take more than two hours, Company will pay you your “market rate” (but not more than $50.00 per hour) for your reasonably time spent on such activities.
As to purchased Ideas, you hereby irrevocably designate and appoint the Company and its officers and agents, as your agent and attorney-in-fact to act for and on your behalf and instead of you, to execute and file any documents, applications or related findings and to do all other lawfully permitted acts in furtherance of the purposes set forth above in this Agreement, including, without limitation, the perfection of assignment and the prosecution and issuance of patents, patent applications, copyright applications and registrations, trademark applications and registrations, or other rights in connection with such Ideas and improvements thereto with the same legal force and effect as if executed by you.
Company has the right to have the provisions of this Section specifically enforced by either the Company or any third party who is assigned or licensed rights in such Ideas by the Company, and any such third party is intended to be a third party beneficiary of this provision.
You further understand and agree that: (i) you are solely responsible for understanding all copyright, patent, trademark, trade secret and other intellectual property or other laws that may apply to your Idea; (ii) you are solely responsible for, and the Company will have no liability in connection with, the legal consequences of any actions or failures to act on your part while using the Website, including without limitation any legal consequences relating to your or any other person’s Intellectual Property Rights or Proprietary Information; and (iii) you represent and warrant that your Idea does not infringe on any rights of others including Intellectual Property rights, was not misappropriated from or assigned to another person, and (iv) you have the right to grant the licenses provided for herein and transfer the title to the Idea and related Intellectual Property Rights provided for herein.
The assignment by Innovator of title to Ideas and the related Intellectual Property Rights is not contingent on any particular amount (over $100) of Innovator’s Payment Amount being paid. If after the Company delivers notice to you of the amount of your Innovator’s Payment Amount, and the Company does not in fact pay that amount (except for amounts offset for obligations of the Innovator to the Company or because the Innovator has breached a representation or warranty in this Agreement), the transfer of title to the Idea and the related Intellectual Property Rights is void. If an Innovator believes the Company has not made such a payment and believes the transfer of title is void, the Innovator will notify the Company of that fact within 75 days after the Company notifies the Innovator of the amount of the Innovator’s Payment Amount or the Innovator is barred from asserting title did not pass. Further, within 15 days after delivery of that notice the Company may cure any default in making payment by tendering payment to the Innovator.
Well, it’s clear to me that Napkin Labs is in the business of shifting through crowdsourced ideas, looking for great insights that it can license or sell off.
This is the dark side of so-called crowdsourcing. It’s like paying Pacific islanders pennies to dive for pearls which are sold for thousands in the salons of Europe.
This is similar to the ‘crowdsourcing’ that goes on in the design world these days, where designers collectively compete against each other on draft ‘spec work’ and the customer picks a winner to complete the final deliverable. Here the losses are the intense competition around price, and the unbounded nature of the work involved. As a result, a crowd of designers work and time is wasted, while a single designer is picked.
In both cases, iffy ethics are at work, skewing the power in the situation to the buyer and away from the seller. This is the sort of destructive competition that has led to the creation of guilds and unions in the past, but we live in a cut-throat, post-modern civilization, where it’s increasingly everyone for themselves: neofeudalism 2.0.
- The Crowdsourcing Quagmire (sixrevisions.com)
- Has Crowdsourcing Worked for You? (boss.blogs.nytimes.com)
